Ready For Retirement

Connor plans to retire soon and wonders if he should pay off his mortgage of $300,000 or invest those funds, especially since he has a low interest rate. James gives a detailed response and reveals why there is no one-size-fits-all answer. When it comes to having a mortgage in retirement, math and spreadsheets can help with part of the question, but emotions and personal values should be considered too.Questions answered:Should you pay off your mortgage as you head into retirement, especially if you secured a low interest rate mortgage in recent years?How should you weigh the financial benefits of investing available funds versus the emotional peace of mind of being debt-free in retirement?Timestamps:0:00 - Connor’s question1:36 - An example scenario4:51 - Interest rates6:22 - Tax considerations9:13 - Tax-adjusted mortgage interest rate 12:13 - Sequence of returns15:27 - Peace of mind17:07 - ConclusionCreate Your Custom Strategy ⬇️ Get Started Here.Join the new Root Collective HERE!

Retirement tax planning should begin well before retirement. Listener Jodie, with over $2 million in assets in various types of accounts, is concerned about the high tax bracket she anticipates she be in in retirement. Is there a tax strategy that would put her in a lower tax bracket?  James explores some often-overlooked tax strategies that can save retirees thousands in retirement, especially for those like Jodie with diverse portfolios.Questions answered:How could my home be part of my tax strategy?How can understanding different income sources and account types can help minimize tax burdens in retirement?Timestamps:0:00 - Jody’s question3:54 - The home7:06 - Inflation and tax thresholds11:04 - Cash flow vs taxable income15:07 - Withdrawal strategy19:30 - SummaryCreate Your Custom Strategy ⬇️ Get Started Here.Join the new Root Collective HERE!

Listener Michael asks about how Social Security is taxed, the rationale behind the 50% and 85% tax thresholds, and the implications of these taxes on Social Security and IRA withdrawals.James responds by explaining how Social Security is taxed at the federal level, highlighting the concept of provisional income and the thresholds that determine the taxability of benefits. He notes state taxation of Social Security, explaining that most states do not tax these benefits and naming the ones that do. He also explains practical strategies for managing Social Security taxes, including the Social Security tax torpedo, and how to incorporate these considerations into broader retirement and tax planning.Questions answered:How is Social Security income taxed at the federal level, and what are the provisional income thresholds?What is the Social Security tax torpedo, and how does it impact the effective tax rate on retirement income?Timestamps:0:00 - Michael’s question1:06 - How SS is taxed3:15 - Provisional income thresholds 5:21 - Another example7:13 - Thresholds for married filing jointly8:41 - SS state taxes9:59 - How to pay taxes on SS12:26 - SS tax torpedo14:27 - Effect on Roth conversionsCreate Your Custom Strategy ⬇️ Get Started Here.Join the new Root Collective HERE!

Listener Nael opens up a discussion about Roth conversions. There are benefits to doing Roth conversions, but can you do too many? Are there any downsides to Roth conversions?Reaping the tax benefits from Roth conversions requires hitting a specific sweet spot. If you convert too little or too much, you’ll be leaving money on the table. So, how do you find Roth-conversion the sweet spot? James lays out five things you should consider as you plan when and how much to convert:1. Macro and micro tax environment2. Required minimum distributions3. State tax brackets4. Charitable giving5. Legacy planningQuestions answered:How might a future out-of-state move impact Roth conversion decisions?What impact might Roth conversions have on charitable giving or legacy gifts?Timestamps:0:00 - Question from Nael2:20 - The wrong4:27 - The right way7:21 - The reality9:12 - Macro/micro tax environment11:19 - RMDs and state taxes15:36 - Charitable giving17:12 - Legacy and life expectancy21:22 - Wrap-upCreate Your Custom Strategy ⬇️ Get Started Here.Join the new Root Collective HERE!

David has a question about taxes in retirement: When you’re retired and no longer getting a regular paycheck from which your employer withheld tax payments on your behalf, how do you estimate the taxes you’ll owe? To answer this question, it’s important to understand where income in retirement will be coming from and how that income is taxed. Once you have an idea of what you’ll owe, you need to make estimated tax payments throughout the year. James explains how Social Security, withdrawals from pre-tax accounts, pensions, and brokerage accounts are taxed, and he explains how and when to make estimated tax payments to the IRS. Questions answered:What is the Safe Harbor Rule and how is it relevant to estimated taxes?Is all income in retirement taxed the same?Timestamps:0:00 - David’s question2:09 - Estimated tax payment options5:28 - Back to David’s question7:48 - Types of income – SS11:02 - Pre-tax retirement accounts13:53 - Average vs marginal tax rate 15:50 - Pensions17:26 - Brokerage accounts21:20 - How to make estimated tax payments23:23 - Other considerationsCreate Your Custom Strategy ⬇️ Get Started Here.Join the new Root Collective HERE!

Mark asks a common question – What should I do regarding my withdrawal strategy? Should I first pull from my brokerage account or my IRA? There is no one-size-fits-all answer, but James provides a framework for creating a strategy to increase your odds of getting the most out of your money saved. He walks through the pros and cons of first pulling from your IRA versus a brokerage account, taking into consideration required distributions, tax rates and strategies, capital gains, Roth conversions, tax gain harvesting, and charitable giving. Questions answered:What are the tax implications of giving to family members versus charities?How should capital gains affect my withdrawal and tax strategy?Timestamps:0:00 - Mark’s question3:12 - Pros of pulling from IRA7:24 - Lower tax rate today9:27 - Cons of pulling from IRA first11:38 - Charitable giving13:58 - Pros of brokerage pulls 18:40 - Other potential pros 21:39 - Cons of pulling from brokerage 26:03 - Things to consider30:50 - Wrapping up Create Your Custom Strategy ⬇️ Get Started Here.Join the new Root Collective HERE!

Dr. Riley Moynes, author and creator of a popular TED Talk joins James to discuss his own retirement which led him to become the author of The 4 Phases of Retirement. While Dr. Moynes was financially prepared for retirement, he wasn’t prepared for the boredom and depression that followed the first two years of retirement fun. As it turns out, his retirement path was far from unusual. Dr. Moynes shares what leads to a truly meaningful retirement and how you can prepare now for a meaningful, deeply satisfying retirement, one that is about much more than vacations and golf.Connect with Dr. Riley Moynes:Website: https://thefourphases.com/YouTube Channel: https://www.youtube.com/@rileymoynes545TedX Talk: https://youtu.be/DMHMOQ_054U?si=wr1B3lw5ysc05GPSBook: https://thefourphases.com/buy-the-book/The Workshop: https://thefourphases.com/book-a-workshop/Questions Answered:Why are some people unhappy in retirement, and is there a way to prevent that?What are some reflective questions that can set me on the path to a satisfying retirement?Timestamps:0:00 - Dr. Riley Moynes and his research4:55 - Phases 1&2 - vacation and boredom9:57 - Phases 3&4 - trial and reinvention12:45 - Ask the tough questions16:06 - Skip Phase 2 and 3?18:39 - Pre-retirement preparations22:52 - Service to others26:05 - SummaryCreate Your Custom Strategy ⬇️ Get Started Here.Join the new Root Collective HERE!

Listener Sherry asks a good question: How do large, one-off expenses (like a new roof, new car, etc.) fit in the 4% Rule? James explains the concept of the 4% Rule and its limitations while demonstrating how it can be an effective guideline in planning and forecasting retirement success. He addresses the importance of anticipating one-off expenses and, depending on your portfolio withdrawal rate, using sinking funds to get a reality check on where you stand.Questions answered:Are one-off expenses covered in the 4% Rule?Who should be concerned with creating sinking funds for one-off expenses?Timestamps:0:00 - Sherry’s question3:19 - Shortcomings of the 4% Rule5:30 - Look at income and outcome6:58 - Portfolio withdrawal rate10:51 - Example of no margin13:02 - Sinking funds16:57 - New reality check18:49 - Consider the duration of expenses20:17 - The wrap-upCreate Your Custom Strategy ⬇️ Get Started Here.Join the new Root Collective HERE!

Healthcare subsidies are like a tax break and should always be optimized, right? That seems like an easy question that should have a straightforward answer. But the correct answer is, “It depends.” Cole from Move Health is back, as he and James explain how advanced premium tax credits work, when you might not want to take them, and why it’s imperative to have a financial plan and a tax strategy in mind as you make healthcare insurance decisions. They share case studies and remind listeners that we don’t need to feel intimidated regarding healthcare in early retirement. We just need to be informed.Questions Answered:Who is eligible for advanced premium tax credits?When should I not try to optimize healthcare subsidies?Timestamps:0:00 - ACA coverage2:19 - Advanced premium tax credits4:59 - Determining subsidies8:09 - Modified adjusted gross income9:36 - Estimating income13:17 - Optiming premiums and subsidies15:28 - Tax/subsidies strategies18:56 - A case study21:43 - When to optimize subsidies27:10 - Another case study29:34 - Tips and takeawaysCreate Your Custom Strategy ⬇️ Get Started Here.Join the new Root Collective HERE!

We meet many people who are in a position to retire early. But when they think about healthcare in retirement and not being eligible for Medicare until age 65, they feel stuck, even though they’re ready for retirement in every other way. Cole Craven of Move Health Partners chats with James about the healthcare options that are available for early retirees and why there is no one-size-fits-all, “best” solution. He also lays out a general timeline for ensuring a smooth transition between your current healthcare, early-retirement healthcare, and post-age 65 healthcare.Questions Answered:What are my healthcare options if I retire before age 65?What are advanced premium tax credits, and how can I make the most of them?Time stamps:0:00 - Cole Craven on early retirement4:05 - 5 pre-65 retirement healthcare options9:35 - Determining the best option11:38 - Advanced premium tax credits13:27 - Upcoming ACA changes16:16 - Is low-income strategy a good idea?18:50 - How/where to get coverage22:03 - Timeline for pre-and-post 6524:32 - Wrap-upCreate Your Custom Strategy ⬇️ Get Started Here.Join the new Root Collective HERE!